BBVA Credit Quality Reality Check.....Spain & Portugal NPA Almost Double To 5.1 Percent

Grim is no overstatement......... Keep in mind that BBVA is probably one of the stronger players ( asset management, south america exposure ) when it comes to the Spanish banking system.....No wonder the "complacency" hit a high just two weeks ago...;-)

Übel ist sicher keine Übertreibung.... Verweise vorsorglich mal darauf hin das BBVA ( Asset Management & Südamerika Diversifikation ) als einer der stärkeren Spieler im spanischen Bankenmarkt gilt....Kein Wunder das weltweit die "Sorglosigkeit" noch vor 2 Wochen neue Hochs erreciht hat.... ;-)

BBVA Q4 Report / PDF

Doubtful risks stood at €15,602m, showing a 24.8% increase over the level reported at 30-Sep-2009.

The NPA ratio rose to 4.3%. This was higher than the third-quarter figure due to the aforementioned increase in doubtful assets. In Spain & Portugal the ratio was 5.1%

cleaner / schärfere Version

The Group’s coverage ratio of 57% at 31-Dec-2009 is considered adequate because if the value of the collateral associated to these risks is included (€16,842m), coverage would increase to 165%......

>Let´s hope their collateral comment has priced in the coming implosion of the Spanish housing market ( so far the market has only fallen slightly UPDATE: This BRILLIANT INTERACTIVE CHART gives an excellent hint that we have almost seen nothing yet )..... Otherwise the coverage ratio would be not quite "prudent"......Keep the following stat in mind....

> Bleibt zu hoffen das hier die jahrelange "Implosion" speziell des spanischen Immobilienmarktes eingepreist ist ( bisher ist der Verfall "moderat" gewesen UPDATE: Dieser brilliante INTERAkTIVE CHART zeigt eindrucksvoll das in Spanien in Sachen Korrektur noch "Nachholbedarf" hat ) ...... Ansonsten wären die vorgenommenen Rückstellungen vorsichtig ausgedrückt nicht gerade "weitsichtig".... Dazu sollte man sich nachfolgende Zahl ins Gedächnis rufen.....

Spain Bubble Watch

For a decade, the Spanish housing sector enjoyed uninterrupted growth, as low interest rates encouraged borrowing. Average house prices have nearly quadrupled during the past 10 years. About 750,000 homes were built in Spain in 2006 -- more than in France, Germany and the U.K. combined.

> Combine the number with unemployment rate hitting almost 20 percent and the picture isn´getting better.....

> Wenn man diese Zahl mit einer Arbeitslosenquote nahe 20% kombiniert dürfte klar sein was sich hier die nächsten Jahre abspielen wird......

UPDATE FT Alphaville

....meanwhile, it seems the group was forced to increase provisions after following through on actual foreclosures and acquisitions. In other words, it wasn’t until the bank acquired the assets that it realised the collateral had been misvalued on its books by €200m. The heart of the problem being the misvaluation of the collateral backing the loans.

>With this kind of accounting it is no wonder BBVA has manage to post a profit......But in comparison to Wells Fargo BBVA isn´t loocking so bad......Banks & balance sheet qualities....... Here we go again.... Nice to see that they are still talking about their "strong" capital ratios & the "nice" dividend ( 30% payout ratio )......

>Bei solch "konservativer" Bilanzierung ist es kein Wunder das BBVA es geschafft hat einen Gewinn auszuweisen....Wells Fargo mußte ganz andere "Verrenkungen" unternehmen ... Nur gut das wir in Sachen Bankenbilanzqualität so große Fortschritte gemacht haben..... Beruhigend zu hören das noch immer von der starken Kapitalausstattung und netten Dividende ( 30& Gewinnausschüttung ) geschwärmt wird....

In Spain & Portugal it ( coverage ratio ) was 48%.

>With over 90 percent of mortgages tied to variable rates they can only pray that the ECB will stay on hold for another decade....

>Da in Spanien über 90% der Hypotheken variabel verzinst sind dürfte dort Stoßgebete in Richtung EZB gehen das die Zinsen noch jahrelang auf dem Tief verharren werden....

>Does anybody remember this "fine tuning" news from Jan. 2009.......

>Erinnert sich noch irgendjemand an die "Fine Tuning" Operation der Banco de Espana vom Januar 2009....

How Not To Restore Confidence....."United Arab Emirates & Spain Edition"

Spanish website Cotizalia reports that Spain’s banks and cajas are negotiating on a one-to-one basis with the Bank of Spain to “fine-tune” their 2008 accounts in order to avoid taking catastrophic write-downs on lans.

According to the article, the central bank has agreed to allow the banks to increase the “calendar of amortisation” of these troubled assets, which are said to be mostly loans to property developers.

>Add the following trade ( couldn´t resist.... ) from the Spanish central bank to the mix and i´ll bet that hand in hand with the banking implosion the so far praised Banco de Espana will face some serious headwinds......

>Bei Begutachtung der o.g. Daten und des nachfolgenden Trades ( konnte nicht widerstehen...) wird eher früher als später vom Glanz der bisher so gelobten spanischen Zentralbank nicht viel übrig bleiben.....

Banco de España has already been delving into the covered bond market with money from gold-sale proceeds FT Alphaville May 2009

Barclays Capital on Wednesday morning cites Spain’s Expansion newspaper on a report that Banco de España has already been delving into the covered bond market with money from gold-sale proceeds .

We note that the latest available data, as reported to the IMF for March, show that Spanish gold holdings at end-March were 9.054mn oz, unchanged since end-July 2007. That said, it should also be noted that Spain slashed its gold holdings during 2005-2008: from 16.826mn oz at end-2004 to 9.054mn in July 2007.

PS: Iberia’s weighting is almost 20% of European GDP & Greece only 3%....

PS: Spanien & Portugal stehen mal eben schlappe 20% des European GDP.... Griechenland für 3%.....

Soured Loans To Other Banks

Just one more example how banks have marked numerous assets on their balance sheets..... ;-)

Ein weiterer Beleg wie marktgerecht die einzelnen Positionen der Bankenbilanzen bewertet sind..... ;-)


WSJ
After slogging through quarters of losses from disastrous bets on the Arizona and Florida housing markets, Milwaukee-based Marshall & IlsleyCorp. is facing a new source of pain: bad loans to other banks.

The bank said Tuesday it expects to post a larger third-quarter loss than analysts had expected, in part because it will set aside $185 million for loans to other banks that have abruptly gone bad.

In fact, the bank said 75% of the now-troubled loans to other lenders were current just seven days ago on Sept. 30.

Here comes another example.......... This time it´s CRE......

Hier ein weiterer Beleg für die "überragende" Bilanzqualität wenn es um die Risikovorsorge bei gewerblichen Immobilien geht.....

Fed Frets About Commercial Real Estate WSJ

In another sign that many U.S. financial institutions are inadequately protected against potential losses on commercial real-estate loans, banks with heavy exposure to such loans set aside just 38 cents in reserves during the second quarter for every $1 in bad loans, according to an analysis of regulatory filings by The Wall Street Journal. That is a sharp decline from $1.58 in reserves for every $1 in bad loans from the beginning of 2007.

Make sure you visit the comment section for another stunning CRE story leading to the highest per-square-foot price paid for a Birmingham office property since 2001, easily topping the 2008 mark........

Empfehle zudem einen Besuch in den Comments für ein weiteres Bespiel aus der "Wunderwelt" der gewerblichen Immobilien die erzählt mit welcher Finanzierung es auch jetzt noch möglich die Quadratmeterpreise aus dem Jahr 2008 locker zu toppen .....

Silent Treatment On Bank Write-Downs

More "transparent" accounting........ At least nice to see that even the WSJ calls this accounting "bizarre".....

Schön zu sehen das die Bilanzierung im Finanzwesen seit der Krise noch "transparenter" geworden ist und...... Immerhin bleibt zu bemerken das selbst das ansonsten extrem bankenfreunldiche WSJ diese Bilanzierungsform als "bizarr" klassifiziert.....

Silent Treatment on Bank Write-Downs WSJ

Whenever asset write-downs don't hurt earnings, it pays to look closely. As banks snap up weaker peers, a little-known and somewhat bizarre accounting treatment suddenly has come to the fore.

The past 18 months has spawned the acquisitions of Wachovia by Wells Fargo, Washington Mutual by J.P. Morgan Chase, Countrywide by Bank of America and National City by PNC Financial Services Group. And while bank megamergers likely are over, there could be plenty of fair-size deals among regional banks.

Deserving special scrutiny is the accounting treatment that allows banks to write down acquired loans after the deal, but keep those hits out of their income statements.

It works like this. Bank A buys Bank B, acquiring a loan portfolio, $1 billion of which it believes won't get paid in full. It therefore takes a $200 million write-down on these impaired loans, meaning they come onto Bank A's balance sheet with a fair value of $800 million at the deal date. If those loans subsequently deteriorate, the bank typically has to book a reserve against them, hurting earnings.

However, there is a situation in which postdeal marks don't hit earnings, but only affect shareholders' equity. That is when such adjustments are based on factors that actually existed at the acquisition date, but the acquirer was ignorant of. In the example, Bank A might say it discovered after the deal that another $500 million of acquired loans were in fact impaired at the time of the deal. Bank A's income statement would avoid the hit it then takes on those loans.

Granted, banks can't know everything at the time of a deal. However, adjustments have been large in recent cases, they can take place for a whole year after the deal, and they have happened after acquirers say they have done extensive due diligence.

Moreover, outsiders have no way of gauging whether the circumstances that led to the "look-back" write-downs actually were there at the time of the deal. Their best hope is that auditors are keeping track.

PNC initially classified $19.29 billion of National City loans as impaired, as of closing at year-end 2008, marking them down to $11.9 billion. But in the first half of this year, PNC classified another $2.6 billion of National City loans as impaired, marking them down by $1.6 billion, or a sizable 62%.

If look-back adjustments weren't allowed, PNC might have had to take a hefty reserve against these loans, possibly eroding the bank's $905 million of first-half pretax earnings.

PNC said it had only 69 days between announcing the deal and closing it to review loans, while real-estate appraisers faced a "significant backlog." And the bank has booked reserves on other impaired National City loans, because of deterioration after the deal.

> Compared to other "creative" accounting stunts this example isn´t sounding really "bizarre"......;-) Will be interesting to see if Wells Fargo will use this tool to manage their earnings and especially if the market is once again willing to accept the often very poor earnings & balance sheet quality of almost all financial companies.... Could be the inflection point to short this market.....

> Verglichen mit all den anderen kreativen Bilanzierungsformen hört sich selbst das o.g. Beispiel wenig "bizarr" an......;-) Ich denke es lohnt sich darauf zu achten ob insbesondere Wells Fargo das o.g. Schlupfloch nutzen wird. Sollte der Markt die oft extrem schwache Gewinn und Bilanzqaulität der Finanzinstitue zur Abwechslung mal nicht abfeiern könnte dies der Wendepunkt für die Märkte sein.

Prime Time Humor.....

Thanks to Gary Varvel!



















Souring Prime Loans Compound Mortgage Woes WSJ



MBA: Record 13.2 Percent of Mortgage Loans in Foreclosure or Delinquent in Q2 Calculated Risk

The Market Ticker

Delinquency cure rates refer to the percentage of delinquent loans returning to a current payment status each month. Cure rates have declined from an average of 45% during 2000-2006 to the currently level of 6.6%. It is important not only to observe total roll rates, but delinquency cure rates as well, according to Managing Director Roelof Slump.

In addition to prime cure rates dropping to 6.6%, Alt-A cure rates have dropped to 4.3%, from an average of 30.2%, and subprime is down to 5.3% from an average of 19.4%. 'Whereas prime had previously been distinct for its relatively high level of delinquency recoveries, by this measure prime is no longer significantly outperforming other sectors,' said Slump.

With A 0.86 % Reserve Coverage Ratio In Their Commercial Loan Book I Hope GE Is Right About Their "Strong Asset Quality"

I have now listened to the last 4 or 5 conference calls ( including the GE Capital Special Presentation ) from GE and i must admit that the management still hasn´t convinced me about their earnings and balance sheet quality. Despite their AA+ rating..... :-)

You just have to look at the following slides from last weeks presentation ( well worth a look ) about their loan loss reserves/recovery assumptions for their commercial exposure ( incluidng all kinds of collateral like corporate jets etc )...........

Ich habe im Laufe der letzten 9 Monate bestimmt die 4-5 GE Analystenveranstultungen mitgehört ( vor allem auch die Sonderpräsentation von GE Capital ) und ich muß gestehen das trotz aller Versuche Transparenz zu verbreiten mein Vertrauen in die Gewinn und Bilanzqualität nicht größer geworden ist . Trotz des immer noch erstaunlichen AA+ Ratings..... :-)

Warum das so ist? Ich verweise mal exemplarisch auf die nachfolgenden Slides der letztwöchigen Ergebnispräsentation ( mehr als nur einen Blick wert ) die ausweist mit welchen Annahmen ( Rückstellungen, Wertansetzungen der Sicherheiten und tatsächlichen Kreditverlusten ) GE im gewerblichen Kreditbuch ( mit allen möglichen Sicherheiten wie z.B. Firmenjets usw...... ) kalkuliert.
All this with a commercial loan & lease book well over $ 200 billion.......

Die o.g. Grafik der Vorsorge deckt ein gewerbliches Leasing/Kreditbuch von deutlich über 200 Mrd $ ab......

Here is the math behind behind the number........ With their assumtions on recovery, cure & collateral rates one really has to hope that their "world class" asset quality is indeed "well collateralized"......

Hier die Berechnung hinter der o.g. Zahl...... Wenn man sich die einzelnen Positionen genauer ansieht bleibt zu hoffen das die wie von GE permanent betonte "überragende Qualität der Assets" sowie die gute Absicherungsposition solch niedrige Risikovorsorgen rechtfertigen.......

The trend is definitly not GE´s friend.......

Der Trend der Problemkredite ist sicher nicht wenig erfreulich und ich kann keinen Grund erkennen warum sich das in absehbarer Zeit ändern sollte......

"Imagination at work"......... During the past year GE´s inftastructure segment ( along with Buffet ) was able to bail their financial arm out..... Lets hope their new equipment orders will at least stabilize ( now down 21 % yoy from high level & with hope of a rebound thanks to the numerous stimulus programms worldwide)... Nevertheless nice to hear that GE & the rating agencies predict no need for more capital...... UPDATE: The Earnings Bomb Inside GE Capital (GE)

Der GE Leitspruch "Imagination at work" ( Imaginantion = Vorstellungskraft ) bekommt hier ne ganz neue Bedeutung...... Im letzten Jahr mußte der "gesunde" GE Teil ( Infrastruktur ) sowie Buffet herhalten um GE Capital mit etlichen Mrd zu stützen . Da jetzt aber auch hier die neuen Orders momentan mit 21% gen Süden krachen ( wenn auch von einem hohen Level und mit der Hoffnung auf die Konjunkturprogramme ) bin ich mir nicht sicher ob dies zukünftig auch noch möglich sein wird. Trotzdem schön zu hören das GE und die Ratingagneturen davon ausgehen das kein neues Kapital benötigt wird.... Update: The Earnings Bomb Inside GE Capital (GE)

Pure Comedy Again From Wall Street Finest "Wachovia Offers Deep Deep Value"

You just cannot make this up..... I assume the the value on Wachovia after today's blockbuster news including a net loss, slashing the dividend, massive dillution etc is even getting deeper......I´ll bet that news like fail to change the view from "Wall Street Finest" that ranked Wachovia at number 6 pointing to the dividend yield of 9.5 percent and the low pe...... For more details see Wachovia presentation

Es wird Zeit für eine neue Folge aus dem Tolllhaus mit dem Titel "Was machen Wall Street Finest eigentlich beruflich ?........ Evtl. waren Förtsch, Prior und co doch nicht so übel........ Mal gucken ob sich die Sicht der Dinge nach der heutigen Granatenmeldung von Wachovia geändert hat. Dort werden so nebensächliche Dinge wie eine massive Kapitalerhöhung die den Wert erheblich verwässern wird, eine drastische Kürzung der Dividende, ein Nettoverlust usw angekündigt. Denke die Dividendenrendite von 9,5% ( siehe Nr. 6) sowie das angepriesenen niedrige KGV dürfte wohl zukünftig nicht mehr zum "Deep Value Play" von diesem selbsternannten Experten gehören..... Für noch genauere Infos siehe Wachovia Präsentation

WSJ

Wachovia Corp. said it will raise $7 billion in capital through stock sales and cut its dividend by 41%, a consequence of its ill-timed move into becoming a major mortgage player, as it posted a first-quarter net loss caused by $2 billion in "market-disruption" losses and sinking credit quality.

The infusion represents Wachovia's second dip into the capital trough this year. In January and early February, Wachovia pocketed a total of $8.3 billion in capital by issuing preferred stock and other securities to investors

Credit-loss provision were increased to $2.83 billion from $177 million as net charge-offs soared to 0.66% of average net loans from 0.15%. Nonperforming assets, those loans near default, ballooned to 1.70% of loans from 0.42%. Net interest margin, the difference between interest earned on loans and paid on deposits, dropped to 2.92% from 3.06%.

Citi, UBS & co: deep, deep value FT Alphaville
Not for the faint-hearted. Lehman is making the case for shifting away from growth stocks and towards value. Which means financials.

Just as Meredith Whitney gets going on her latest round of predicting outsize writedowns....

The result is a very European-heavy, financials-heavy list of names. Here’s their top 20:

Carolina dreamin'Commentary: Wachovia ignored the risks in Golden West deal

Wachovia Corp.'s struggles today can be traced back to a single, mistaken deal: the purchase of Golden West Financial Corp. in 2006. Two years ago, the Charlotte, N.C.-based Wachovia agreed to $24.2 billion for Golden West, an Oakland, Calif.-based savings and loan run by Herb and Marion Sandler, the legendary husband-and-wife banking team that took over the S&L in 1963 and built GW into one of California's biggest lenders

Unfortunately, Golden West was a business built on adjustable-rate mortgages. Even though analysts questioned Wachovia's chief financial officer, Tom Wurtz, about the prudence of adding exposure to that market, he brushed it off.

"It's a very complicated process to put in place all of the discipline and process that they have to get the in-house appraisers, get them trained and to create the working knowledge by the broker community that they been able to achieve through a long-standing period of training with those brokers and delivering on their commitment," Wurtz said in a conference call announcing the deal. "And so from that standpoint there is extraordinary value in their mortgage operations."

Ouch!

Citigroup Still With $ 37.3 Subprime Exposure.....

I think it is interesting to read the Citigroup Results in detail. Make sure you see this Excellent Presentation. Lots of data. I have put the focus on subprime exposure and credit costs. Lets hope their internal models for valuing these securities has improved during the past 2 quarters ( UPDATE & hat tip via Calculated Risk"Citi is basing their CDO loss forecasts on house price decline of about 7% each for each of the next two years")...... But i think with the new CEO in charge there is hope that they are now more realistic. He normally has no incentive to underestimate. But after all i have seen from this company ...... Here are my earlier takes on Citigroup and here the details to the $14.5 billion of capital infusion. Nice to see that they are still paying a dividend ...... What a farce!

Ich denke es lohnt sich die Citigroup Results im Detail durchzulesen. Kann jedem diese excellente Präsentation ans Herz legen. Haufenweise Infos die ein Bild geben was in den einzelnen Märkten so vor sich geht. Ich habe hier setllvertretend mal die Zahlen zu Subprime und den explosierenden Kreditkosten herausgepickt. Bleibt zu hoffen das die internen Modelle auf denen die Wertermittlungen basieren in den letzten 6 Monaten besser geworden sind ( Update & Dank an Calculated Risk "Citi is basing their CDO loss forecasts on house price decline of about 7% each for each of the next two years )...... Mit dem neuen CEO an Bord bestehet aber zumindest die Hoffnung das man jetzt näher an der Realität ist. Üblicherweise neigt der neue CEO dazu bei der ersetn Ergebnisveröffentlichung unter eigener Verantwortung klar Tisch zu machen. Aber nach allem was ich bisher von diesem Unternehmen gesehen habe....... Hier meine früheren "Gedanken" in Sachen Citigroup. Zusätzlich hier die Details zur $ 14.5 Mrd Kapitalspritze. Lächerlich das im gleichen Atemzug noch immer eine Dividende gezahlt wird.....

Sildes taken from the Excellent Presentation

Credit costs increased $5.41 billion, primarily driven by an increase in net credit losses of $1.56 billion and a net charge of $3.85 billion to increase loan loss reserves.

-- U.S. consumer credit costs increased $4.1 billion, comprised of $689 million in higher net credit losses and a net charge of $3.31 billion to increase loan loss reserves. The $3.31 billion net charge compares to a net reserve release of $127 million in the prior-year period.

The increase in credit costs primarily reflected a weakening of leading credit indicators, including increased delinquencies on 1st and 2nd mortgages, unsecured personal loans, credit cards, and auto loans. Credit costs increased also due to trends in the U.S. macroeconomic environment, including the housing market downturn, and portfolio growth.

UPDATE: Here are some more links with very good insights / Hier einige andere gute Link mit meiner Meinung nach guten Meinungen

Citi Dividend, Future Prospects and Credit Cards Calculated Risk

Live-Blogging the Citigroup Earnings Call WSJ

Cost of Capital "Ratchets Up" at Citigroup and Merrill Mish

Citi confirms $18bn Q4 writedown; signs of consumer stress FT Alphaville

I Want My Buyback Back "Washington Mutual Edition"

Today this news is making headlines

Heute kommt diese Schlagzeile über die Ticker

WaMu to Raise $2.5 Billion in Additional Capital, Reduce Dividend, Resize Home Loans Business and Cut Expenses to Fortify Capital Base

Flashback January 2007

On Jan. 3, 2007, the company entered into an accelerated share repurchase agreement with a dealer, buying back $2.7 billion of its common stock ( Stock close to $ 40 now $ 19)

Fineprint Citigroup Warning

This story fits perfect with the latest news from the UBS (and more to come probably on a weekly basis...). Make sure you also read this from Minyanville A Look Inside Citigroup's Writedowns & No Kidding.... More Off Balance Sheet Vehicles For Citigroup . A must read!

Das ganze paßt hervorragend zu den heutigen Neuigkeiten die aus der Schweiz von der UBS (und zukünftig auf Wochenbasis von rund um den Globus) kommen. Zudem solltet Ihr Euch das A Look Inside Citigroup's Writedowns via Minyanville & No Kidding.... More Off Balance Sheet Vehicles For Citigroup nicht entgehen lassen.

Quote Prince CEO Citigroup just a few weeks ago The $1 Billion Break Up Fee & An Ignorant And Deaf CEO

Dieses Zitat vom CEO der Citigroup ist gerade einige Wochen alt.......

"When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing".

Not a good sign if the CEO of the world biggest bank need signs like this.......

Kein gutes Zeichen wenn der CEO der weltgrößten Bank anscheinend solch deutliche Hinweisschilder benötigt.....

FT Citi takes big hits across the board: 60 per cent drop in Q3 income That huge loss has been realised from two hits from LBO debt and subprime mortgages. throughout the credit crunch, banks have been quick to point out that they hold few, or no subprime assets. Most casualties so far have thus been victims of contagion. No such luck for Citi.

Instead, there’s just huge amount of LBO debt and subprime mortgage securities stuck on the bank’s balance sheet - making it the most direct casualty of the credit crunch to date. Citi lost $1.4bn on holdings of LBO debts:

Write-downs of approximately $1.4 billion pre-tax, net of underwriting fees, on funded and unfunded highly leveraged finance commitments. These commitments totalled $69 billion at the end of the second quarter, and $57 billion at the end of the third quarter. Write-downs were recorded on all highly leveraged finance commitments where there was value impairment, regardless of the expected funding date.

And Citi are still having difficulty syndicating. As FT Alphaville observed earlier Monday, bank’s are having to brook significant losses on sales where they can make them - so there could be more pain for Citi to come.

As for Citi’s subprime debt, it too is stuck on the bank’s books: “warehoused” for use in future securitizations. Here the bank reports $1.3bn in losses:

Losses of approximately $1.3 billion pre-tax, net of hedges, on the value of sub-prime mortgage-backed securities warehoused for future collateralized debt obligation (”CDO”) securitizations, CDO positions, and leveraged loans warehoused for future collateralized loan obligation (”CLO”) securitizations.

Note that Citi, a touch coy here, hasn’t disclosed the total amount of subprime securities they hold - only the $1.3bn loss on them they’ve realised so far.

But those losses aren’t just coming from toxic debt products. Citi has also lost $600m through their fixed income trading operations because of “market volatility”. And a massive $2.6bn hit has been taken because of an increase in global “credit costs”. The charge was:

Due to continued deterioration in the credit environment, organic portfolio growth, and acquisitions. Approximately one-fourth of the increase in credit costs was due to higher net credit losses and approximately three-fourths was due to higher charges to increase loan loss reserves.

While other banks have been nimble on their feet and hedged their way around big losses, Citi’s results look nothing short of an out and out embarrassment. UBS was quick to direct senior figures towards the job pages and announce changes and cost cutting. Surely heads will also roll at Citi?

We suspect that all that troubling talk of a Citigroup break up to unlock shareholder value could gain ground again - fast.

> Maybe that´s the reason why the stock is up. I have the feeling that there is almost no news bad enough out there to put a positive spin on it. At least i havn´t heard a "Buffet" rumor yet... ;-)

> Wird wohl auch der Grund sein warum die Aktie z.Zt. höher notiert.Es gibt wohl kaum eine Meldung die schlecht genug ist um nicht für einen Spinversuch herhalten zu müssen. Immerhin mußte das letzte Mittel "Buffet" bisher nicht herausgeholt werden..... ;-)

Surprising Trends in Federal Reserve Data / Minyanville

Minyanville Peter does an excellent job of digging trough the details of financials. And with the financials accounting for over 30% of S&P earnings and also the largest component of almost every broader index this sector key for the further direction of the market. And until recently nobody from Wall Street finest saw this coming. And they are still far behind the curve ( see comments)..... I also highly recommend The problem with financials / Hussman with lots of additional details, charts and tables.

Hier sorgt Minyanville Peter mal wieder für Durchblick im Datenwust der Finanzkonzerne. Und da die Finanztitel der mit Abstand wichtigste Bestandteil des S&P 500 sind und bisher für knapp 30% der Gewinne verantwortlich sind sollte man diesen Sektor immer ganz genau beobachten. Die Finanztitel dominieren ebenfalls fast alle anderen gängigen Indizes in den USA. Und bis vor kurzem war für die "vorausschauenden" Analysten die Welt noch in Ordnung. Und auch jetzt noch sind Sie immer noch meilenweit hinter der Realität zurück (siehe Kommentare)... Ich empfehle zu diesem Themenkomplex noch The problem with financials / Hussman mit weiteren Details, Charts, Links und Tabellen.

Thanks to Bespoke

Minyan Peter, who has become quite popular around the 'Ville with readers and professors alike, here continues his informative series on banks. Previous entries were Bank Earnings 101, Bank Earnings 102, and Bank Earnings 103.

In Bank Earnings 103: Reading Bank Balance Sheets, I emphasized the importance of bank balance sheets as a predictor of future bank earnings. ....

Over the weekend I spent some time reviewing Friday’s H-8 to see what trends I could uncover. To make it simple for myself I looked at annualized growth trends from February to July – “the best of times” - and compared them to the annualized growth rates for the most recent four weeks reported - August 8 to September 5.

So what did I find?
The contrast in asset growth trends between small and large banks is startling. Large bank balance sheets have ballooned since early August – rising at an annual rate of almost 73% versus a 5.5% annual rate from February to July. I have written previously that credit growth in this cycle was built on an “originate for sale” business model. You really see that in these balance sheet growth statistics. With secondary markets very tight, large banks are clearly being forced to hold assets they would have previously sold.

Since early August, while large bank balance sheets are bursting, small bank balance sheets, having been flat for most of the year, are now shrinking – and at an almost 18% annual rate. The biggest declines appear to be coming from real estate related lending activity, particularly revolving home equity lines.

Large bank net assets (a Fed proxy for total capital) appear to have peaked in May and are down almost 7% since then. Small bank net asset capital, however, continues to be growing – although I would caveat that many small banks do not finalize loan loss reserves until the very end of the quarter and this may push net asset values down. As a result of balance sheet growth and lower net capital, large bank capital ratios have dropped from 12.7% of assets in May to 11.3% - still very strong, but a material decline.

The growth in large bank balance sheet assets has been largely funded through non-core deposits. Since early August large time deposits ($100,000+) have been growing at annualized rate of more than 75% (versus flat from February-July) while non-deposit borrowings are growing at a near 100% annual rate. It also appears that large banks are pulling off-shore liquidity on-shore. Net due to off-shore affiliates has grown dramatically.

Large bank balance sheet growth has not been constrained to loan portfolios. Investment portfolio growth, particularly mortgage-related securities, has been enormous since early August (+68% annualized growth rate versus less than 6% for February-July).

It appears that systemic credit extensions have also grown significantly since early August. Having declined from Feb to July, broker dealer loans and interbank loans are now growing at 100% annualized rates.

While, admittedly, four weeks is a relatively short time frame, the changes in large bank balance sheet composition since early August are significant and warrant continued focus, particularly if reported capital continues to decline.

Further, the fact that smaller bank balance sheets are shrinking raises questions to me. I will be watching small bank earnings releases to determine whether their balance declines are a symptom of weaker loan demand, more strict lending standards, or fallout from tightened available liquidity. While none is positive, weaker loan demand would represent a more fundamental economic change.

Disclosure: Short KBW Mortgage Finance Index

New foreclosures set 55 year record

After numbers and more important increases like this every person that is using the word "contained" should know better that the wave is coming.....And we are still early in the process.....

So langsam dürfte auch dem letzten Zweifler bewußt werden was da für eine Welle auf die USA zukommt...... Und wir sind immer noch ziemlich am Anfang........

Very reassuring that right now the loan loss reserves are at new lows....

Beruhigend zu wissen das gerade jetzt die Risikovorsorge der Banken neue Tiefen erreicht.....

“for the fifth quarter in a row, reserves failed to keep pace with the increase in non-current loans.” The industry's “coverage ratio” of reserves to non-current loans fell to the lowest level since the third quarter of 2002, while non-current loans posted the largest quarterly increase since the fourth quarter of 1990.

CHICAGO (MarketWatch) -- The number of mortgage loans entering the foreclosure process in the second quarter set another record, according to the latest data from the Mortgage Bankers Association.

According to the group's quarterly delinquency survey, a seasonally adjusted 0.65% of loans on one- to four-unit residential properties entered the foreclosure process during the period, the highest level in the survey's 55-year history. In the first quarter, when the previous record was set, 0.58% of loans entered the process; a year ago, 0.43% entered the process.

Driving the numbers were the states of California, Florida, Nevada and Arizona, said Doug Duncan, MBA's chief economist and senior vice president of research and business development, in a news release.

"Were it not for the increases in foreclosure starts in those four states, we would have seen a nationwide drop in the rate of foreclosure filings.

> Too bad that he didn´t came with this argument during the boom and that he didn´t mention that states like California account for 13% of the US GDP...... Time to report "foreclosures ex foreclosures" or a "core foreclosure rate"......

> Dumm nur das solche Typen nicht wärend des Booms ähnliche Berechnungen aufgemacht haben und das er nicht erwähnt das Staaten wie Kalifornien für ca. 13% der gesamten US Wirtschaftsleistung stehen..... Wir werden demnächst ne "core" Zwangsvollstreckungszahl von ihm zu hören bekommen.....

From Greenberg Why California housing matters

Because the Golden State accounts for 13% of the country's gross domestic product or the total value of all goods and services produced nearly double the No. 2 contributor, New York. That means that what happens in California, home to such growth industries as high-tech, biotech, venture capital and film, doesn't necessarily stay in California.

The impact of slow economic growth, or even recession, in the state will ripple through the rest of the country.

Thirty-four states had decreases in their rates of new foreclosure and the increases were very modest in the states with increases, other than those four," Duncan said.

Duncan said there was a "clear divergence" in performance between fixed-rate and adjustable-rate mortgages because of the impact that rate resets have.

"While the seriously delinquent rate for prime fixed loans was essentially unchanged from the first quarter of the year to the second ( Bloomberg is reporting "In the second quarter, 2.73 percent of prime borrowers made their mortgage payments at least 30 days late, up from 2.58 percent in the first quarter"), and the rate actually fell for subprime fixed- rate loans, that rate increased 36 basis points for prime ARM loans and 227 basis points for subprime loans," he said.

California has 17% of the subprime ARMs in the country and more than 19% of the foreclosure starts on subprime ARMs. California, Florida, Nevada and Arizona have more than one-third of the country's subprime ARMs and more than one-third of the foreclosure starts on subprime ARMs.

According to the survey, 1.40% of all outstanding loans were somewhere in the foreclosure process during the second quarter, up from 1.28% in the first quarter and 0.99% a year ago.

The delinquency rate for mortgages on one- to four-unit proprieties was 5.12% in the second quarter, up from 4.84% in the first quarter and 4.39% a year ago.

Disclosure: Short KBW Mortgage Finance Index

The problem with financials / Hussman

It is not hard to understand why common sense from Hussman is obviously not good for the business of Wall Street. I wanted to add another point that doesn´t makes thing better. I think if the financials would be forced to account conservatively the lots of the earnings would fall apart. If you want an example of how "creative" this process has become make sure you read Wells Fargo Gorges on Mark-to-Make-Believe Gains

Es ist aus nicht weiter verwunderlich das der gesunde Menschenverstand der jede Woche von Hussman unters Volk gebracht wird nicht gut für das Geschäft von Wall Street ist. Ich habe noch einen Zusatz zum Report zu machen. Ich bin mir ziemlich sicher das die Gewinne schon jetzt deutlich geringer ausfallen würden wenn die Finanzkonzerne konservativer bilanzieren würden. Als anschauliches Beispiel wie weit die "kreative" Auslegung der Bilanzvorschriften inzwischen gediehen ist bietet sich dieser Link an Wells Fargo Gorges on Mark-to-Make-Believe Gains

The problem with financials
We continue to carry a very low weight in financial stocks. Though the recent weakness in these stocks has prompted a great deal of interest in “bottom fishing,” my impression is that such efforts are based on the same untempered assumptions of high and growing earnings in this sector that existed months ago. P/E ratios ought to be well below historical norms when those P/Es are based on record earnings and record profit margins. In my view, existing valuations are based on untenable assumptions of permanently high profit margins in this sector, with optimistic growth assumptions as well.

In 2000, this was the essential problem with the technology sector. It was some time before Wall Street's expectations caught up with the reality that profit margins are cyclical and that early declines off of overvalued peaks do not constitute bargains.

I expect that in the next year or two, we will observe at least one quarter, and more likely a full year, in which the entire profit of the U.S. banking sector is consumed by loan losses.

Consider, for example, the latest FDIC Banking Profile, which was published based on June 30, 2007 data (before the recent liquidity crisis emerged). In that report, the FDIC noted that the ratio of loan loss reserves to total loans remains at a 32 year low. As for the portion of those loans that are in trouble, the FDIC notes “for the fifth quarter in a row, reserves failed to keep pace with the increase in non-current loans.” The industry's “coverage ratio” of reserves to non-current loans fell to the lowest level since the third quarter of 2002, while non-current loans posted the largest quarterly increase since the fourth quarter of 1990. Recall that 1990 and 2002 were periods when recessions were already well underway. If we're already seeing these signs of credit stress at the peak of an economic expansion, the figures we observe in a recession are likely to be a lot worse.

> Make sure you read Is WaMu the Next Countrywide? to see how ugly the situation and the quality of earnings already is.

> Ich kann jedem empfehlen Is WaMu the Next Countrywide? zu lesen um zu verstehen wie übel die Lage selbst bei einigen großen Instituten inzwischen aussieht.

> The impact on total S&P 500 earnings is if you take this table from Bespoke already over 30 percent. I have seen charts that include the impact of the financial arms from companies like GE, GM, F, Harley etc and the number is closer to 30 perecnt and 40% of the profits. Either way you look at it this number is going to decline significantly.

> Der Gewinnanteil an den gesamten S&P 500 Gewinnen liegt wenn man nach der Übersicht von Bespoke geht bei über 30%. Ich habe auch schon Aufstellungen die zusätzlcih die Finanarme von GE, GM, F, Harley usw miteinrechnen. Dann verschieben sich die Zahlen Richtung 30 und 40 Prozent. Wie man es auch dreht und wendet diese Anteile werden sich in den nächsten Jahren massiv gen Spüden bewegen.

> Here Bear Stearns as an example. I´ll bet that the real number for 07 and 08 will be much lower. How can any Analyst come up with another conclusion is a mystery to me. They should know that Bear is viewed as the most vulnerable as it generated 44 per cent of its revenue from its fixed-income business, according to Bernstein Research. It also has least exposure to less troubled markets outside the US. Here is another good story why a slump in earrnings is very likely American Investment Banks "Shots In The Dark" Economist

> Nehmt Bear Stearns als Beispiel. Ich gehe jede Wette ein das die tatsächlichen Gewinne in 07 und 08 deutlich niedriger sein werden. Wie ein Analyst hier zu einer anderen Meinung kommen kann ist mir schleierhaft. Ich gehe davon aus das denen der Fakt bekannt ist das Bear 44% seiner Umsätze im Anleihebereich macht und fast ausschließlich auf die USA beschränkt ist. Hier ein guter Link der zeigt warum dei Gewinne aller Investmentbanken wohl demnächst deutlich niedriger ausfallen dürften. American Investment Banks "Shots In The Dark" Economist

EPS Trends	Current Qtr Aug-07	Next Qtr Nov-07	Current Year Nov-07	Next Year Nov-08
Current Estimate	2.32	3.19	12.73	13.62
7 Days Ago	2.78	3.48	13.43	14.47
30 Days Ago	3.36	4.05	14.69	15.76
60 Days Ago	3.39	4.04	14.72	15.78
90 Days Ago	3.50	4.21	15.28	15.95

> And when you look at this table of pending LBO deals via the NYT it should be clear that the investmentbanks are also facing "loan" trouble.....

> Und wenn man sich diese Übersicht der noch zu finanzierenden LBO Deals von der NYT ansieht kann man sich leicht ausrechnen das die Investmentbanken ebenso wie die gewöhnlichen Banken einige "Kreditprobleme" zu lösen haben....

James Grant put it this way – “Benjamin Graham and David L. Dodd, in the 1940 edition of their seminal volume ‘Security Analysis,' held that the acid test of a bond or a mortgage issuer is its ability to discharge its financial obligations ‘under conditions of depression rather than prosperity.' Today's mortgage market can't seem to weather prosperity.”

As of June 30, 2007, the net income of all FDIC insured banking institutions totaled $36.8 billion. At an annual rate, that represents about 2% of all loans outstanding. Meanwhile, net charge-offs for bad loans were already running at an annual rate of about 0.50% in June. That's in a strong economy, before the recent problems, and loan loss reserves didn't even budge from a 32-year low. Net charge offs could easily quadruple in a mild recession.

Importantly, the problems go far beyond sub-prime. In its June 30 report, the FDIC noted “all of the major loan categories posted both increased net charge offs and higher net charge off rates.” Overall, net charge-offs jumped by over 50% from year-ago levels, with a jump of over 60% for consumer loans and over 70% for industrial loans. These percentage jumps are so high because they are off of such a low base, which underscores the extent to which observed profits in the financial sector have been unhindered by loan losses in recent years. Charge-off rates have not soared as much for credit cards, but this is because the existing level of charge-offs is already high (representing over 3% of the total amount volume of credit card balances, year-to-date). In short, the problems are in all categories, and given the thin coverage of the banking system for such losses, rising charge-offs and loan loss reserves are likely to bite deeply into earnings.

For some financials, relatively high dividend yields are being touted as a measure of safety and quality for investors. The difficulty is that if earnings come under pressure, a greater share of earnings will be required to cover those dividends.

> Let us hope that the Analysts are not so far behind the curve as they were with the homebuilders Number Of The Day ....Earnings Estimates for Homebuilders..... But as i said before....Common sence isn´t good for business......

> Bleibt zu hoffen das die Analysten in diesem Fall nicht ganz so daneben liegen wie bei den Buildern Number Of The Day ....Earnings Estimates for Homebuilders..... Wie ich aber schon vorher angemerkt habe ist der gesunde Menschenverstand nicht förderlich um Geschäfte an Wall Street zu machen.....

Now the bust is taking a brutal toll. In January, industry analysts predicted that the 10 biggest builders would have average earnings per share of $3.69 for 2007; the latest forecast is for a loss of $1.18.

Of course, the long-term return is equal to the dividend yield plus the long-term growth rate of dividends. Though I don't expect forced dividend reductions for major U.S. bank stocks, I do believe that the growth rates assumed by Wall Street here are overstated. And while a well-covered dividend can produce a lower “duration” and therefore a smaller sensitivity to broad market fluctuations, it does not in itself produce an undervalued stock. ....

In any event, my impression is that the problems for financials are just beginning, and that the risk premiums demanded by investors are likely to rise. As investors have seen throughout market history, stocks having rich valuations, weakening fundamentals, and rising risk premiums typically don't constitute great bargains.

> Now compare this to the "call" from Wall Street finest.... They obviously didn´t use any realistic earnings estimate. The only way they can justify this target is probably the "Fed Model". But as Hussman also has pointed out in "Fed Model"Knowing What Ain't True every body that has to use this argument is at best clueless (try to stay polite)........

> Nun vergleicht diese Aussagen mal mit den unvermeindlichen Zielen und Prognosen für den S&P 500. Anhand von realitischen Gewinnschätzungen sind diese Ziele sicher nicht erstanden. Die einzige Erklätung wäre das das brüchtigte "Fed Model" eine gewichtige Rolle gespielt hat. Wie abermals Hussman in "Fed Model" Knowing What Ain't True geschrieben hat ist jeder der dieses Argument heranzieht im besten Fall ahnungslos ( höflich formuliert).......

Disclosure: Short KBW Mortgage Finance Index

Is WaMu the Next Countrywide?

Not very "conservative"..... But it is getting very dangerous when you combine this with the percentage of earnings that is coming from capitalized interest and add the unpaid principle to the mix..... It should be clear that Washington Mutual is also using the latest accounting innovation "Mark-to-Make-Believe Gains" ( at least the increase is modest compared to Wells Fargo.....)

Das ganze scheint nicht sonderlich konservativ.....Wenn man aber dazu noch die Auswirkungen des sog. "capitalized interest" hinzunimmt wird es halsbrecherisch. Unter dem Begriff versteht man die Tatsache das bei den Krediten mit negativer Tilgung die nicht gezahlten Zinsen einfach der G+V der Bank zugeschlagen werden (als wären diese Gelder tatsächlich geflossen ). Zudem wächst dank der negativen Tilgung die Kreditsumme weiter an und erhöht so das Risiko. Es ist geradezu selbstverständlich das Washington Mutual auch die neueste Errungenschaft der kreativen Buchführung "Mark-to-Make-Believe Gains" für sich entdeckt hat. Immerhin ist das Ausmaß nicht ganz so üppig wie bei Wells Fargo

wamu credit quality....and capitalized interest up 300%. January 2007

Capitalized interest recognized in earnings that resulted from negative amortization within the Option ARM portfolio totaled $1.07 billion and $292 million for the years ended December 31, 2006 and December 31, 2005.

The total amount by which the unpaid principal balance of Option ARM loans exceeded their original principal amount was $852 million, $681 million, $474 million, $298 million, and $160 million at December 31, 2006, September 30, 2006, June 30, 2006, March 31, 2006 and December 31, 2005. ( up 432%!!!!!)

An analysis of the largest 20 banks and thrifts by TheStreet.com Ratings shows that four institutions are under-reserved for possible credit losses, a red flag as the economy slows and mortgage defaults rise.

Perhaps more troubling, the numbers show that one of those institutions -- Washington Mutual -- could join Countrywide in facing serious liquidity problems as worries about the housing and mortgage markets multiply. Meanwhile, another big lender, National City , could see its earnings and dividend come under pressure as a result of its low reserve levels.

With the financial sector under increasing stress, TheStreet.com Ratings checked two key ratios to measure the strength of big banks' balance sheets: loan-loss reserves as a percentage of nonperforming loans, and nonperforming assets as a proportion of core capital and reserves.

Banks and thrifts walk a fine line in setting their quarterly loan-loss provisions, which add to their reserves against future losses. If they reserve too little, they can be seen as taking on more risk in the event of a decline in credit quality and padding their earnings for the current quarter (since the loan-loss provision lowers net income). If they reserve too much, investors, analysts and regulators may see the institution as over-reserving -- so it can manage earnings by under-reserving at a future point when earnings would otherwise weaken.

> This should hurt overall banking earnings for years to come....

> Das sollte die Bankgewinne noch Jahre belasten......

A good benchmark for loan-loss reserve coverage is 100% of nonperforming loans, which are loans past due 90 days or more. If a bank is forced to charge off loans totaling more than its loan-loss reserves, the losses eat into capital. That can hurt earnings if loan quality continues to deteriorate.

Another thing to consider is headline risk. As we have seen with Countrywide, any bad news in this environment can cause depositors to flee -- every bank's worst nightmare

Looking at the largest 20 banks and thrifts, it is clear that four are under-reserved and two have an alarming level of capital exposure to nonperforming loans. Here's a look at the four cases.

At Washington Mutual, as at the other institutions, credit quality is in decline, and reserves appear somewhat skimpy. Given those trends, in a worsening economic environment liquidity -- as well as the bank's dividend -- could come under pressure.

The bank reported nonperforming assets comprising 1.40% of total assets as of June 30, double the level from a year ago. The thrift's net income rose 9% from a year ago in the second quarter, but its ratio of reserves to nonperforming loans dropped to 43.4% -- its lowest level in more than five years.

Meanwhile, Washington Mutual's ratio of nonperforming assets to core capital and loan-loss reserves was 19.17% -- a very high level for a large bank. Most banks and thrifts we surveyed showed a number well below 10%.

If we assume that when disposing of a repossessed home a bank is likely to recover 70% of the remaining loan balance, the institution would still be comfortably well-capitalized, with a risk-based capital ratio of 11.76% (it needs to be 10% to be considered well-capitalized).

OK so far, but what if a significant portion of the loans past due only 30-90 days are eventually foreclosed? Loans past due 30-89 days totaled $2.9 billion. Addressing the expectation of a continued decline in credit quality, CFO Thomas Casey revised the holding company's guidance for reserves for the second half, saying the company would set aside $900 million to $1.1 billion for reserves during the second half of 2007. This will have a major impact on earnings.

If banking industry conditions deteriorate, Washington Mutual's divdend could come under pressure. The company paid out 60% of its second-quarter earnings to shareholders. This payout ratio is high, considering that the thrift is under under-reserved -- so it is conceivable that the dividend may have to be reduced in coming quarters, if asset quality continues its dramatic decline.

Liquidity is also a major concern. A high percentage of Washington Mutual's deposits are in non-retirement accounts with balances exceeding $100,000. We call these large, partially insured deposits "hot money." Washington Mutual's hot-money ratio was 37.6% as of June 30. As we saw last week with Countrywide Bank, these deposits can fly quickly in a time of uncertainty. ....

Mortgage LendersSweeten Savings Rates from the WSJ (free)

Last week, Washington Mutual Inc. raised rates on online six-month CDs to 5.5% from 3.9% and, in recent weeks, began promoting special rates on shorter-term CDs in its branches and through its call centers

Average rates on six-month, one-year and five-year CDs are 3.55%, 3.75% and 4.03%, respectively, according to Bankrate.com.

> Fits perfect to the overall picture.......

> Paßt hervorragend in das Gesamtbild.... Nie ein gutes Zeichen wenn deutlich erhöhte Marktzinsen gezahlt werden müssen...

Disclosure: Short KBW Mortgage Finance Index (including WM)

Countrywide Says `Unprecedented Disruptions' May Hurt Profit

Why is anybody surprised? Just read Countrywide .... Genius At Work...... to understand that this management is almost criminal and was mainly acting only to the benefit of themselves to unload their stock options. Here is a must see example via Mish of how unethical (to put it mildly) this guy is. Needles to say that Cramer praised Countrywide just a few month ago......

Wer ist hier überrascht ? Es langt sich Countrywide .... Genius At Work...... durchzulesen um zu verstehen das bei diesem Management der Laden den Bach runtergeht. Hier wurde in erster Linie darauf geachtet das Aktienoptionen versilbert werden konnten. Hier ein Beispiel das mehr als alles andere zeigt wie kriminell speziell der CEO agiert. Es ist überflüssig zu erwähnen das Guru Cramer die Aktie noch vor ein paar Monaten als "die Aktie" im US Hypothekenmarkt gepriesen hat

Aug. 10 (Bloomberg) -- Countrywide Financial Corp., the biggest U.S. mortgage lender, said it faces ``unprecedented disruptions'' that may crimp profit, suggesting a credit crunch that started with the U.S. subprime market will spread.

Countrywide won't be able to sell as many of its loans as expected because investor demand has dried up, the Calabasas, California-based company said in a filing with the U.S. Securities and Exchange Commission. It also said it may have difficulty obtaining financing from creditors. Shares of the company fell as much as 13 percent in after-hours trading.

``The secondary market and funding liquidity situation is rapidly evolving, and the potential impact on the company is unknown,'' Countrywide said.

Shares of Countrywide, which have lost a third of their value this year, fell to $25 in late trading from $28.66 at yesterday's close in New York Stock Exchange composite trading.

``We are experiencing home price depreciation almost like never before, with the exception of the Great Depression,'' Countrywide Chief Executive Officer Angelo Mozilo said during a conference call with investors last month.

> Here are some thought on the real estate market 1929 vs 2007

> Der amerikanische Immobilienmarkt damals (1929) und heute (2007)

Countrywide's allowance for credit losses was $531.1 million as of June 30, almost double the amount on Dec. 31, it said in the filing.

More Consolidation
Countrywide again assured investors that it has enough cash to cope with a credit crunch and said it may benefit as the industry's capacity shrinks. The company said earlier this week that it had access to $186.5 billion at mid-year.

> Not a o good sign when you have to do that.....

> Kein gutes Zeichen wenn man diesen Schritt gehen muß....

Still, Countrywide said it was no longer trying to sell $1 billion of subprime mortgage loans and would instead hold them as investments ``for the foreseeable future.'' The loans now have a value of about $800 million, Countrywide said.

Now he must address an increase in missed payments for prime loans, or those granted to borrowers with good credit histories. The company set aside $292.9 million for loan losses in the second quarter, compared with $61.9 million a year earlier, as it earmarked $181 million for prime home-equity loans.

> Time to take a look at all the houses that are weighing on the Countrywide balance sheet.... If they will survive they should considering to become a REIT :-)

> Zeit sich mal die Immobilien anzusehen die momentan die Bilanz belasten......Sollte Countrywide diese Krise überstehen in Erwägung ziehen als REIT zu firmieren :-)

Thanks to Dimitris and his excellent Countrywide Foreclosures Blog

Countrywide accounts for almost a fifth of all mortgages made in the U.S. The company revised its forecast of new loans to $420 billion to $500 billion this year, from $450 billion to $550 billion predicted in April. It extended $123.1 billion in new loans during the second quarter, 15 percent more than a year earlier.

Disclosure: Short KBW Mortgage Finance Index (including Countrywide)

M&T Bank Nonperforming Loans

0.38%, 0,52%, 0,63%, 0,68%....does anybody see a trend.......I think this is the story of the coming years. See also my opening comments in this post.

Über 0,38% zu 0,68% binnen 12 Monaten. Unschwer hier einen Trend zu erkennen.....Diese Thematik wird uns wohl die nächsten Jahre bei den US Banken verfolgen. Mehr unter dem o.g. Link

Loans classified as nonperforming totaled $296 million, or .68% of total loans at June 30, 2007, compared with $156 million or .38% a year earlier, $224 million or .52% at December 31, 2006 and $273 million or .63% at March 31, 2007.
Contributing to the increase in nonperforming loans from March 31, 2007 was the addition of a $34 million loan to a residential home builder and developer in the Mid-Atlantic region

Disclosure: Short KBW Mortgage Finance Index